The road ahead could be rocky for the stock market, but that doesn’t mean you should stop investing.
With presidential elections often comes uncertainty. However, this year’s election has the potential to be more volatile than usual, with concerns about pushback from the losing political party regardless of which candidate wins.
This volatility can be concerning to investors, who may be worried about whether right now is the best time to be investing in the stock market. While it may be tempting to hold off on investing until the election is over and the dust settles, there’s one good reason to continue regardless of what’s going on in the political world.
Why a long-term strategy is often the best approach
One of the best investing moves you can make is to invest for the long term and avoid trying to predict what the market will do in the immediate future. It’s easy to get caught up in how the market is performing on a day-to-day or week-to-week basis, but oftentimes the most important metric to remember is how stocks perform over years or decades.
The stock market has survived countless crashes, recessions, and political turmoil over the years. Despite wars, civil unrest, economic uncertainty, and a global pandemic, the market has still managed to continue its upward climb.
That’s not to say the market doesn’t experience volatility. It has experienced wild ups and downs, and it can sometimes take years to fully recover from losses, such as after the Great Recession. But the market has always bounced back stronger than ever, and has always produced positive returns over time.
Nobody knows whether the market will crash after the election, but even if it does history shows that it will likely recover eventually. And as long as you’re investing for the long term, it won’t necessarily matter what happens in the next few months or years.
How to invest for the long haul
When you take a long-term investing approach, it’s crucial to ensure you’re investing in the right places. If your primary goal is to keep your money as safe as possible in the stock market, your best option may be to invest in index funds. Index funds track the market, so while they may decline in the short term if the market falls, they will also bounce back once the market recovers.
Index funds are also a good option for those nearing retirement age who will likely need their savings sooner rather than later. You may also opt to invest more conservatively in bonds rather than stocks, depending on how close you are to retirement. Just keep in mind that you’ll still want your investments to continue growing as much as possible during your senior years, so it’s a good idea to keep at least a portion of your portfolio allocated toward stocks.
If you’re investing in individual stocks, do your homework to make sure you’re investing in solid companies that have a good chance of pulling through periods of volatility. Of course, there’s never any guarantee when investing in the stock market — but the more research you put into your strategy, the more likely it is your investments will survive whatever the future holds for the stock market.